Interest rates declined from April to May, resulting in millennials securing the lowest average interest rate on 30-year loans since Ellie Mae began tracking the data in January 2016. Low rates corresponding with the peak homebuying season led to a month-over-month increase in purchase share – the percentage of all loans closed during the month that were purchases.
According to the Ellie Mae Millennial Tracker, average interest rates for this demographic in May dropped to 3.42%, down from 3.48% the month prior. During this same time, purchase share ticked upwards from 45% to 47%, the first month-over-month increase since November 2019. It is important to note that this does not mean refinance volume has slowed, and year-over-year, refinance share is still up 39 percentage points.
“The refinance market is still strong, but as we progress further into what is traditionally peak homebuying season, we’re seeing the purchase market come to life as historically low interest rates give first-time homebuyers the confidence to make the American Dream a reality,” said Ellie Mae Chief Operating Officer, Joe Tyrrell. “Millennials haven’t previously been able to secure rates this low and they’re taking advantage of this opportunity.”
With purchase activity, driven by seasonality and low rates, on the rise during a refinance boom, average time to close for all millennial loans leapt from 40 days in April to 43 days in May. Broken down by loan purpose, average time to close reached 44 days for refinances, up 4 days month-over-month, while purchase loans took 42 days to close on average, a 2-day increase from April.
“Spurred by low rates, overall loan application activity has increased, leaving lenders to manage larger-than-expected pipelines at a time when in-person meetings aren’t feasible from a health and safety perspective,” said Tyrrell. “Lenders with digital mortgage technology quickly shifted and took advantage of solutions, like virtual notarization, and they have been able to turn this volume into revenue, while lenders who haven’t made this investment have struggled to clear their pipelines, leaving business on the table.”
